Global warming: Richard Tol talks about the policies we need for climate change

Richard Tol is a Professor of Economics who works at the Economic and Social Research Institute. I was reading his extremely interesting guest posts at Roger Pielke Jr.'s weblog, both here and here. I emailed a question for Professor Tol and his answer led to this interview. He's plain spoken, which is refreshing. He is the Professor of the Economics of Climate Change at the Vrije Universiteit, Amsterdam, The Netherlands. He specialises in climate, energy and environmental economics. He holds a Doctorate in Economics and a Masters of Science in Econometrics from the Vrije Universiteit Amsterdam.

As with previous interviews, I will be following up with him in a few days. I would greatly appreciate it if you put any questions you would like Professor Tol to answer in the comments.

1. First, what drew you into the debate over the choices involved in climate change? How have your contributions been received in your professional community? Has it caused you any problems, engaging on this issue?

I wrote my PhD on the economics of climate change, and have been an active researcher in this area since.

2. In your opinion, why is economic evaluation of the choices posed by climate change so controversial--to the point that even the attempt to evaluate costs and benefits is vilified by many?

Economics is known as the dismal science. Economists point out that every upside has a downside. In the case of climate change, economists have shown that climate change is not the biggest environmental problem in the world, denying people the catastrophe that they crave. Economists have also shown that climate policy (in Europe) has been ineffective yet expensive, denying politicians their claim that they have saved the world.

3. Have you had a chance to review the evaluations done by others (besides Stern, obviously)? If so, what do you think of them generally, and are there any that you would say take a sound approach? (Specifically, if you could, could you evaluate Bjorn Lomborg and the Copenhagen Consensus?)

The idea behind the Copenhagen Consensus is sound. You can spend a dollar only once, so you should spend it such that you achieve the greatest good. Unfortunately, the Copenhagen Consensus does not have the resources to do a solid comparison of alternative investments.

4.Do you consider the Stern Report's choice of a very low discount rate as sound? What would have been the impact of choosing a more conventional discount rate?

Stern's stark predictions about the impact of climate change would vanish had he used a standard discount rate. The discount rate reflects, partly, how much you care about the future. You should make up your own mind about the discount rate that is right for you. People do, and economists and psychologists have measured people's discount rates. People use much higher discount rates than the one preferred by Nicholas Stern. Stern essentially tried to impose his views on others -- like a colonial master would tell the savages what to think.

5. What would be the impact of recalculating the work done on the Stern report using updated population estimates?

Don't know.

6. Do you believe there has been a conscious attempt by proponents of the AGW theory to bias reports on impacts? Would you be able to offer concrete examples?

The Fourth Assessment Report of Working Group 2 of the Intergovernmental Panel on Climate Change is certainly biased towards overstating the negative impacts of climate change. I do not know whether this was done consciously, or by group think, or by selection bias in the authorship. Probably all three, but it is hard to say which was more decisive.

7. How do you respond to critics who say economics has nothing to offer in the discussion on climate change?

Greenhouse gas emissions result from economic activity. You can only reduce emissions by changing human behaviour. If you want to be successful in emission abatement, you may consider asking the experts like economists. Emission reduction costs money. People will ask what for? Economists would help you justify spending such money.

8. Have you formed an opinion on the best course of action to deal with real or potential impacts of climate change? If so, could you share it with our readers?

There should be carbon tax that starts low but increases at a predictable rate.

The direct way to tackle impacts, however, is to adapt. People do not need government support for adaptation, but they do need information and the freedom to act. The best form of adaptation is alleviation of poverty.

9. How do you decide who to trust when reading or talking about climate change? Is it different than the evaluation you would make for other professional discussions, such as the law or politics or medicine? Who specifically do you trust on climate change?

I trust arguments, not people.

As was mentioned during the recent inquiry by the UK House of Commons, Steve Mosher and I have written a book about the leaked emails that have caused so much controversy. The title is Climategate: The CRUtape Letters. It is available on Create Space here, Amazon here, Kindle here and Lulu here. One Amazon reviewer wrote, "Mosher and Fuller do a good job putting the ClimateGate documents in context, and the book is a riveting read. I received my copy yesterday, and find the book to be faithful to the climate war events that I have followed over a period of years. It reports actual email communications of a small group of paleoclimatologists and their roles in perhaps the biggest scientific hoax since Piltdown Man."

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kim5 years ago

Taxing will still warp the market. If CO2 is not a 'bad', we've interfered in the market for nothing. And ground the poor even deeper into poverty, for nothing. This is the way the world ends, this is the way the world ends, this is the way the world ends, not for redemption, for nothing.
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But Kim, if the tax starts and increases at a predictable slow pace, who cares? If CO2 isn't really a problem, we'll know that by the time the tax really starts to bite. Then we'll elect officials who promise to repeal the tax.

Duncan, you ignore lost opportunity costs, and your irony, about trusting to repeal an unnecessary tax is hilarious. In the meantime, hundreds of millions of poor people are laughing out of the other sides of their faces.

I am not surprised with your support of limitation style solutions. I am an engineer and from my perspective, I already know that there are no energy solutions which exist to replace fossil fuels.

You admit the only way to tackle the change is to adapt, yet you would tax those who have the only method of adaptation. Is this because you have demonstrated that current energy cost isn't sufficient to create a wish to economize?

I make a point regularly to my readers, one which is wholly unpopular. Since the IPCC believes CO2 has a thousand plus year lifespan in the atmosphere, we must be concerned not with reduction but elimination of CO2. Therefore, the total summed output of CO2 is the problem. If that is the case, the next technology is the key point at which we can stop producing CO2.

How does your limitation of production strategy lead to a reduced total output before the 'next technology' is introduced?

How long is the delay you have determined before the next technology is introduced?

My own guess is that you have not incorporated any of this into your analyses but I don't know.

If you have not, your answer is wrong. This must be considered in any predictive model of the economy and I doubt very much that it was properly considered.

It's really that simple, if we accept the IPCC and work from what some scientists say, the assumptions lead to a need to look at strategies in the opposite direction.

People don't think clearly on this issue, cheap and massive production of fossil fuel may actually be the be the best way to reduce long term effects of global warming. I've seen no studies refuting these lines.

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The second point which must be made is that the assumption of limitation as the best solution requires that we believe a warmer planet is bad.

This is flatly false from every evidence I can find and I wonder if you can answer which "specific" disaster scenarios created the huge negative economic impact which balanced your equations to require a carbon tax.

@Jeff Id
Stabilisation of the atmospheric concentration of carbon dioxide (mandated by international law) requires zero carbon dioxide emissions. There is disagreement whether or not this is feasible with current technologies but there is no reason why this would not be feasible with future technologies (if we put our minds to it).

I do not work from the presumption that warming is bad. In fact, my research shows that climate change has positive and negative impacts. The positives dominate the negatives for mild climate change, but as the world continues to warm there are net negative impacts. There is considerable uncertainty about the turning point and the level of the impact, but one cannot seriously maintain the point that "any warming is good".

There are two points you make here which require addressing. First regarding your claim of being able to eliminate CO2- "There is disagreement whether or not this is feasible with current technologies"

I've seen no disagreement from anyone. As an engineer I wonder, which technology do you think would be able to eliminate our usage of fossil fuels? I'm not really interested in finding out to beat you over the head with it, but your conclusions require it to exist or be invented and it makes me wonder how thoroughly this was looked at.

From my perspective, the replacement technology simply doesn't exist and you are the first serious person I've read to claim otherwise.

Second, the question of international law (which is a joke I hope) requiring the elimination of CO2, is moot. What I asked was how did you come to the conclusion that the CO2 is damaging and mitigation was the preferred method to invent this aforementioned technology. Which specific factors created the negatives in your study that required a 'tax'?

Ah, and another detail. You make the point that larger warming is bad, I wonder how much warming is too much from your perspective. Where do we start to see the negative impacts. So far there have been precisely zero, there are are still plenty of false impacts extolled by advocates and media, but I see nothing so far. I wonder, did your work require a certain level of drought in Africa or lack of glacial water in India? Perhaps, the Kilimanjaro situation influenced your work, or sea level rise? If that's the case, what levels of warming did you conclude were too high? Did your sea levels depend on melting the -30 C Antarctic?

"Taxing will still warp the market. If CO2 is not a 'bad', we've interfered in the market for nothing."

As Dr Tol pointed out, 'discount rate' is something people calculate.

I.E. Purchasing a home today is certainly more expensive today then renting a home. Yet the vast majority of the people with the financial means purchase rather then rent. Hence they self impose a 'current tax'(higher mortgage payments) for a secure future cost. The price of rent will probably increase with time. But the mortgage stays fixed.

If we use this same logic in relation to energy, we can see for ourselves that fossil energy prices continue to rise. A legitimate discussion, regardless of how one feels about 'climate' is how much extra should we pay today in order to 'freeze' our energy costs.

We can be pretty sure that the oil,gas and coal landlords will be rising the price of our 'energy rent' forever. How much extra we should pay today to get off of 'energy rental' is a legitimate discussion.

@Jeff Id
If you truly believe that I'm the only expert who says that we can have a carbon-neutral economy then you have some catching up to do. The debate is between the likes of Rob Socolow who thinks that we can do this with current technologies and Marty Hoffert who thinks that current technologies cannot be scaled up without serious research.

The United Nations Framework Convention on Climate Change has been ratified and transposed into national law in most countries on the planet.

Re carbon neutrality, the US used 100 quads this year and that's only expected to climb to 105 quads by 2030 (by one estimate--another says 130). But either way, we could make serious inroads on carbon intensity with that level of growth. A few extra windmills, more applications for solar, some low-head hydroelectric installations, better fleet mileage, some decent conservation tactics and more energy-efficient construction, we could actually make some real progress. I haven't even mentioned the 'n' word...

U.S. investment in clean energy dropped 40% in 2009. Some of that will kick back in this year, especially as stimulus money starts getting spent. But China invested almost twice as much as the U.S. of A. last year. (Of course, a lot of their output will get exported back to us.) But investment in clean energy appears to have peaked in Q4 2007. That really has to change, no matter what we think of global warming, peak oil, etc. I mean, we do want clean energy, cetera paribus, don't we?

I disagree with the call for a carbon tax because I disagree with the belief that *carbon emissions* are the principle underlying cause of the problem.

Fossil fuels will naturally become more expensive as they are consumed. There are decades of oil remaining and centuries worth of coal reserves. But demand will increase and prices will go up. Meanwhile, alternative sources will be developed and will be economical on their own.

The best solution is to fight poverty so people can afford to adapt to whatever the future holds. As people become more prosperous, they have more money to expend on the environment.

Solar and wind are not free, btw. They have large up-front costs. Factor in the time it takes to recover the initial expenditure versus the life-time of these systems and many never pay for themselves. Look at the solar energy system installed at Nellis AFB (Las Vegas). That system will never pay for itself over it's expected service life, if current calculations are correct.

We need to stop blocking development of our current energy sources. Build a better energy source and people will want to buy it. No need to tax them into submission through mandates.

Richard Tol: I just read a 54-page presentation by Rob Socolow. His proposal, at least in that presentation, is to move to hydrogen as fuel, where the CO2 produced in the natural gas reformers would be captured and stored - that is, his proposal is based on the massive use of CO2 capture. It does sound technically plausible especially if coupled with shift to nuclear power. I wonder, though, if the same political forces pushing for a move towards CO2 emission reductions are going to like, politically, a solution based on such a large-scale capture-and-storage of CO2. But, who knows.

An interesting example of the effect of AGW policies and ideology can be found by googling DWP at the LA Times. Over the last week the Mayor and environmentalists are trying to change rates and policies of the Department of Water & Power. Just today the City Council rejected the rate increases to increase DWP's renewable percentage. It will be fascinating to see how this plays out.
LA's average electric rates are about in the middle for CA utilities but have a very low renewable %. Integrating solar, geothermal, and wind near the Salton Sea would take time. To develop these projects overnight will cost a lot.
Renewable resources can fit in your portfolio at a cost effective rate but the mandates for renewable are creating a floor price, not a ceiling. Having worked on about $400M of renewable projects, it can be done but takes time.
Solar has reached a glut due to the economic downturn & I can buy solar panels for $2.80/watt. Without subsidies, this would cost 1/2 of PG&E rate-6yr P

Oh, fah, Richard, and you're just gonna believe them? Isn't the whole point of the debate that the science is not settled? So, since the science seems to be settling that CO2 has much smaller impact than previously thought, explain again why we'll need a tax.

@Kim
The public perception of the science has changed, but not the science itself. Many people are now aware of the shenanigans at U East Anglia and the IPCC, but insiders have known about this for years.

No new evidence has come to light that suggests that we should revise downwards the estimates of the climate sensitivity.

The carbon tax is not justified by a particular climate sensitivity. On the contrary, the carbon tax is primarily justified by the uncertainty about climate change and its impacts. Because of the large time lags, you cannot wait and see what you'll learn -- if you'll learn bad things, it'd be too late to do something about it.

Richard Tol, Richard Lindzen and Roy Spencer and others are calculating a value for climate sensitivity from observational data rather than from modeling results, and they are finding a much smaller figure for that sensitivity than that which has been drilled into your head.

The Precautionary Principle is a Paean to Ignorance. Particularly now that our ignorance is both being revealed and lessened, last year's belief system about necessary policy changes needs to be re-visited.

It seems, in fact, that CO2 is such a weak greenhouse gas that it cannot even keep the earth warm.

By the way, Richard, much to be learned at the VS/Zorita cagematch at Bart Verheggen's. Raise high the Red Flags. Stop marching behind your begraggled banner of CO2 demonization.
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@Kim
As I wrote, there is no new evidence. Lindzen and Spencer are on the left tail of the probability density function of the climate sensitivity and have been for a long time. As you no doubt know, there are many empirical estimates of the climate sensitivity, the majority of which are somewhat higher than the physical estimates.

I did not call on the precautionary principle, by the way. It is suited for one-sided risks only, and therefore not applicable to climate change.

Calculations from observations will eventually trump those from modeling. As you no doubt know there is a wide range of estimates of climate sensitivity without a lot of certainty. Lower estimates are being validated by flat temperatures despite rising CO2 levels. It is time to think anew.

Precautionary Principle or not, taxing carbon is not necessary. If we cool for two decades from the concatenations of the oceanic oscillations or for a century if the coming Solar Grand Minimum cools the earth then the small warming effect of CO2 and its large crop fertilizing effect will save millions from freezing and starving to death. Where's your tax in that scenario?

Hasn't Ross McKitrick proposed a graduated level of taxation according to temperature? I suppose I can imagine a scenario when carbon dioxide producers should be rewarded. Your tax in that scenario would be negative.

So let's step back from the brink and think before taxing everything that doesn't move.
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It's hard to believe that you can say with a straight face that climate sensitivity to CO2 is settled science and that it is high. It's equally hard to believe that you can actually assert that there is no new evidence.

One thing we do have is evidence that what we previously believed was evidence was not. Heh, someone should have a look at the provenance of much of what passed for science in the IPCC reports.

Sure, I know the IPCC only aggregates, and how they do it, wow. And sure, I knew you were critical of it. So why don't you now see that the evidence is not as certain as it once seemed? In particular, it now seems to be unreliable enough to support rational policy changes. Something's changed.
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Richard, you are simply not persuasive. To Jeff Id and to me you merely assert your 3 degree C per doubling. Show me the anthropogenic signal in the temperature record. Pretend I'm from Missouri.
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Surely with a 40% rise in CO2 concentration we should be able to find that signal. Yet three times in the last century and a half we've had rates of temperature rise that were the same as the rate from 1970-2000. Yet that rate of rise from 1970-2000 is purported to be due to CO2.

Well, Richard, that warming was from the warming phase of the Pacific Decadal Oscillation. So I repeat, if the climate's sensitivity to CO2 is as high as you believe it to be, where are the results?
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A decade of stable temperatures means a lot when the sensitivity of climate to CO2 is as high as you think it is.

I'm glad you agree that the analyses have showed a wide range of sensitivities. I value analyses derived from observations more than I do those calculated from models, and those studies are showing lower sensitivity. How do you decide to settle on your high figure for sensitivity?
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You kind of put your finger on your own problem there with your statement about a planet with so much water. It is one of the well recognized faults of the models that they do clouds poorly, and have little real science behind their estimations of the magnitude and value of the water vapor feedback to CO2 forcing. And your settled belief in high climate sensitivity depends, to a degree which should be disconcerting to you, on calculations from the output of those same models. So look to your science; it may seem unchanged, but its foundations are disintegrating into sand.
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Tom Fuller has just returned to his home town of San Francisco following 10 years in Europe. He has written technology commentary for The International Herald Tribune's Italy Daily, and consulted on green technology for the UK government. About half of what he writes here will be a liberal skeptic's view of environmental issues.